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Can Transition Dynamics Explain the International Output Data?

This paper studies the transition dynamics predictions of an R&D-based growth model, and evaluates their performance in explaining income disparities across nations. We find that the fraction of the observed cross-country income variation explained by the transitional dynamics of the model is as large as the one accounted by existing steady-state level regressions. Our results suggest that the traditional view of a world in which nations move along their distinct balanced-growth paths is as likely as the one in which countries move along adjustment paths toward a common (very long-run) steady state.

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Paper provided by Department of Economics, Louisiana State University in its series Departmental Working Papers with number 2003-13.

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Handle: RePEc:lsu:lsuwpp:2003-13
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